Trade of the Day: Amgen, Inc. Remains a Promising Biotechnology Play

Shares of Amgen are ripe for a buying stab

By Serge Berger, InvestorPlace Contributor

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Shares of biotechnology stocks jumped on Monday  as the broader stock market rebounded from a brutal two-week sell-off. Among this group Amgen, Inc. (NASDAQ:AMGN) also bounced, albeit somewhat sluggishly so. AMGN stock however remains in a technically sound position and offers investors and traders well-defined risk.

Before we look at the charts of AMGN stock, allow me to remind you that stocks are a highly correlated asset class. This holds particularly true when market volatility spikes such as it has over the past two weeks — stocks almost indiscriminate of type ebb and flow in near lock-step together.

As such, when the broader stock market began to see selling pressure two weeks ago, biotechnology stocks too started to tumble. In other words, the fundamental picture for biotechnology stocks hardly changed over the past couple of weeks, but they are now trading well “cheaper” from a pure price perspective. Thus, if a longer-term asset allocator liked biotechnology stocks thematically two weeks ago he or she should love them here at present levels

AMGN Stock Charts


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Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

On the multiyear chart we see that AMGN stock from late 2014 until August of 2017 was stuck in a well-defined albeit wide trading range. The breakout attempts since haven’t been the cleanest if one were to go by technical analysis 101 standards, but the patterns remain bullish through this lens.

Essentially the stock has now attempted two breakouts but each time mean-reverted back to the upper end of this trading range (brown box) for a re-test. While we have yet to see the stock really accelerate higher on a sustainable basis, the groundwork is being laid.

 


Click to Enlarge

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

On the daily chart note that as a result of the past two weeks of selling AMGN stock’s strong January rally has been completely wiped out. This however now has the stock back at a critical technical confluence support area made up of simple horizontal support as marked by the brown box as well as the red 200-day simple moving average.

With earnings out of the way, this could now provide active investors and traders with an opportunity to buy AMGN stock for a trade against the $168 area as a stop loss, using the $190 are as a first upside profit target.

Check out Anthony Mirhaydari’s Daily Market Outlook for Feb. 13.

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